Tax havens - a secret scandal

All countries need tax revenue to fund vital public services like healthcare and education, and to redistribute wealth to tackle poverty and inequality. One of the biggest barriers to doing this is tax dodging by multinational companies and rich individuals shifting their profits into tax havens.

A staggering £20 trillion is now held by rich individuals in 'secrecy jurisdictions', better known as tax havens. This sum is equivalent to more than 13 times the annual output of the UK economy. If this money was taxed instead it could generate as much as £180 billion a year in tax revenue, more than twice the amount rich countries spend on overseas aid.

Multinational companies are only able to do this because they are allowed to – it is the tax rules of countries like the UK that allow them to dodge tax on such a massive scale. The UK plays a central role in this ‘offshore’ system, with its own network of island jurisdictions such as Jersey and the Cayman Islands ranking among some of the most significant tax havens in the world. The City of London itself acts as the nerve centre for these tax havens and supports an army of lawyers and accountants devoted to helping companies dodge tax.

The UK government can and must act to end the secrecy that allows companies to use the UK’s network of tax havens to avoid and evade tax. They should be required to have full transparency on the companies and trusts that are registered there, and who the real, beneficial owners of those companies are. They should also be made to comply with international tax agreements, including those providing for automatic information exchange; so that tax authorities in the UK and around the world can track the tax they are owed.

The UK government claims to be leading the fight against tax havens. David Cameron said that there are "too many tax havens, too many places where people and businesses manage to avoid paying taxes", yet successive governments refuse to act to abolish the UK’s own global network of tax havens.

Ultimately we need to phase out tax havens and encourage those tax havens, in particular the island economies, to make the transition to a more transparent, ethical and sustainable economy.

Tax havens – a just transition for all

See below War on Want’s 2009 joint statement – to Jersey and all other tax havens – about progressive ways to reform the economies of these countries.

Change is coming to tax havens in 2009. The financial sector will be more regulated. The question is no longer if, but when. The momentum for change has been created by a global banking crisis the like of which has never been seen before. Tax havens and the people who benefit from them – banks and financial speculators - were at the centre of that crisis.

As Gordon Brown said to the US Congress last week, “how much safer would everybody's savings be if the whole world finally came together to outlaw shadow banking systems and outlaw offshore tax havens?”

We're here to say three things about the coming changes. The first is that greater regulation will mean more transparency, improved coordination, and more international cooperation. We recognise that this could have consequences for economies like Jersey's – it could reduce the size of their financial sectors. Jersey needs to be prepared.

The second is that this should not just be about Jersey, or a handful of states on a blacklist. It should be about a systemic change. Bilateral agreements, such as those Jersey has just signed with the UK and France, are not enough. We need a global agreement that treats all countries and territories equally, and establishes a minimum standard for international tax cooperation.

Many of us here today represent development organisations. We believe that this global agreement must be one that finally allows developing countries to et hold of the information they need from other jurisdictions, so they can stop he tax evasion that costs them hundreds of billions of dollars each year, money which could be spent on schools, hospitals and poverty relief.

The third thing we want to say is to encourage Jersey to recognise the changed position and begin to engage with the transition to a new, changed economy that it requires. We're willing to help you with that. We want to engage with authorities in Jersey and elsewhere to discuss how the inevitable transition to a new economic structure might take place.

The big challenge for tax havens is whether they embrace the opportunities that change will create, and use them in a way that benefits all their populations, or whether they resist it, to the detriment of everybody. If this process of change is managed for everyone, it means the transition will be more than just a transition from one level of regulation to another: it will be a transformative change to the structure of Jersey's economy.

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